UCO bank faces state threat over missing funds

KOLKATA: The West Bengal government has threatened to blacklist UCO Bank and call off government business from it as the bank dithers in compensating a state undertaking for Rs 120 crore worth of deposits allegedly siphoned off, while the bank said the deposit certificates are fake and referred the case to the Central Bureau of Investigation.

Finance Minister Amit Mitra told ET that the state-run bank does government business worth thousands of crores in West Bengal and it will run the risk of losing the business if it does not make up for the loss. "If the bank does not compensate, we will be free to think in terms taking back the business we give them," he said. State governments use banks' network for payment of salaries to employees , school teachers and doling out cash benefits for job card holders. IfUCO Bank is barred from doing these, it will lose float money, the interest-free fund available with banks between the time of the money being deposited for cash transfer and the withdrawal of it.

Uco's profit may also be adversely impacted if it has to provide for the alleged fraud. The West Bengal Infrastructure Development Finance Corporation, a 100% subsidiary of the state government , said it transferred Rs 120 crore from Bank of India and opened threeyear fixed deposits withUCO Bank's Circus Avenue branch in Kolkata in two separate transactions.

Deposit Papers Fake, ClaimsUCO Bank Chief

The WBIDFC has alleged that Rs 83 crore was siphoned off from the branch in favour of a local firm. It filed an FIR with the local police, which arrested the branch manager . The bank has now freezed the balance of Rs 37 crore in the account . Following the development, the state's infrastructure financing subsidiary sent a notice to the bank, asking it to return the money with due interest and demurrage .

"The WBIDFC has no accounts with the said branch and the deposit papers shown by it are fake. We have filed the case with the CBI,"UCO Bank Chairman and Managing Director Arun Kaul said. The bank's circle head in Kolkata , CK Mukherjee, however, confirmed that it had received Rs 120 crore from Bank of India through real-time gross settlement but the account number in which the sum was credited to does not belong to the WBIDFC. West Bengal State Cooperative Bank has also alleged that its deposits worth Rs 20 crore were missing fromUCO's Hastings Branch in the city.

Uco has suspended 17 employees of the two branches concerned, pending probe. Mukherjee said the bank's audit team will decide whether it will have to provide fully or partly for the money involved in the case of missing deposits. If it does, there will be some adverse impact on the bank's profitability. "More than one bank is involved in the transactions in question. So, all aspects need to be looked into," he said.